Retailing in Central Business Districts
The past few years have seen a dramatic shift in the way of life in the United States. While years ago, cities were seen as places of danger and filth, today people and businesses alike have been moving from suburban to urban areas at a dramatic rate. Harvard Business Review notices this shift, pointing out one of the largest, most widely recognized urban retailer moves from pharmacy store giant Walgreens. Previously having a majority of suburban locations as the company’s market focus, Walgreens acquired their New York City counterpart, Duane Reade, in 2010. If you take a walk around the city today, you'll see a Duane Reade every few blocks, now being co-branded with its parent company, Walgreens.
So now that we are aware of this major shift, the real question is why businesses have chosen to open retail stores in these central business districts. The fact is there are a lot of advantages that come with setting up retail shops in these areas with the largest and most obvious one being foot traffic. The Harvard Business Review noted that while college-educated millennials were only 12% more likely than other age groups in the U.S. to live within 3 miles of a central business district in 1990, they became 33% more likely in 2000, a percentage that is expected to have increased in recent years. Furthermore, while part of the population my not live in a central business district there sure are a high concentration of people who work in them, thus adding to the increased consumer markets of these areas. Business visitors must also be added to the scope for the market in these areas, thus creating a vast amount of potential customers for a retailer.
Another advantage of setting up shop in central business districts is similar to the idea of globalization. Many retailers who have saturated suburban markets may move to cities to reach their customers at work and/or a completely different market of consumers who live in or visit that area. On the other hand, retailers who are just starting out may begin in a central business district if finically able in order to build their brand recognition and use in the market, which again ties into the idea of the high frequency of foot traffic in these areas.
Some disadvantages lie in the higher prices to rent or buy retail space as well as the decreased amount of foot traffic after normal business hours (around 9am to 6/7pm)- which could prove to be a problem for retailers such as Walgreens and Walmart, as they normally stay open past this time. Lastly, space restrictions may also pose a problem for retailers in central business districts. Due to the value of property and concentration of retailers and other businesses, these areas usually have very limited space in comparison to less congested, suburban areas.
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